Reports everywhere tell of prospective passengers being left stranded, countless cancellations, extortionate pricing and cars taking ages to arrive. So what is going on with Uber?
When Uber first arrived, passengers were delighted at the ease of a car coming at the click of a button. Rightly or wrongly they gleefully booked trips that were half the price of even Minicabs. Private-hire services became affordable to those who wouldn’t have otherwise used its services.
With Uber’s private equity backed presence, Minicabs and Black cabs understandably began to struggle. Now many consumers are probably feeling bad for taking them for granted. Outside London, the situation is worse. Without the ever-present Black Cabs that the capital enjoys many more people are facing long waits for buses or even longer walks home.
The Problems Keep Coming for Uber
December 6th saw a High Court Ruling regarding the contracts private hire operators enter into with their passengers. Lord Justice Fraser and Lord Justice Males ruled that, “In order to operate lawfully under the Private Hire Vehicles Act (London) 1998 a licensed operator who accepts a booking from a passenger is required to enter as principal into a contractual obligation with the passenger to provide the journey which is the subject to the booking.” Regulator Transport for London (TfL) were found to be “issuing licenses whilst ignoring the technicalities and complexities of the law of contract.”
The black cab trade association United Trade Action Group (UTAG) originally brought the case against Uber’s rival Free Now. They accused the firm of operating unlawfully by refusing to take on the legal responsibility for delivering taxi journeys. The judges’ ruling found there to be “no material difference” between Free Now’s business model and Uber’s.
The App Drivers and Couriers’ Union (ADCU), was named as a defendant against Uber and claimed, “The ruling comes as a huge embarrassment for Transport for London and the Mayor of London who have failed to regulate the trade according to the requirements of the legislation.”
The full implications of the case are yet to playout. However we’ve already debated the potential consequences of being classed as the principal rather than an intermediary service provider in our blog The Curious Case of Uber’s £2 Billion VAT bill.
Where have Uber’s Drivers gone?
Even before the above court case went against them, there simply weren’t as many Uber drivers as there once was. The Licensed Private Hire Car Association revealed that an estimated 160,000 of Britain’s 300,000 drivers have not returned to the job after the pandemic.
It seems many have switched to working in food or parcel delivery. Food, after all, doesn’t complain, talking loudly on the phone or throw up on the back seat. Fixed delivery radiuses are also kinder to drivers looking for a predictable day’s work. There is no risk of a surprise journey across the city just as a driver is fantasising heading home and relaxing after a long day.
Being a driver requires significant financial commitments like renting a car contracts, insurance and licensing, once drivers move onto something else, they are unlikely to incur the costs again to come back.
The drivers that are left are also likely to be spread across Uber’s competitors like Lyft, Bolt and Kaptan (now called free now). They compete for market share by giving offers to both drivers and passengers that feel unsustainable. There is less competition from other drivers but also less fares to go around. Drivers pit apps against each other, often taking the best job in order to make a living and cancelling shorter ones. This is cited by many as the reason that people are being left stranded waiting for a car.
As Uber became more of a fixture in major cities, whispers were heard in the news of Uber being at odds with their drivers. Then, in 2016, Uber drivers James Farrer and Yaseen Aslam took the ride-hailing company to an employment tribunal. They were the first to declare they weren’t self-employed but instead workers. Uber denied this, saying that Uber drivers were self-employed ‘partners’, using the app to find riders for their own business.
Uber appealed, but the Employment Appeal Tribunal upheld the ruling in 2017. Uber then took the case to the Court of Appeal, which rejected their appeal and upheld the decision in 2018. On 19th February 2021, The Supreme Court dismissed Uber’s final appeal. As a result, Uber had to classify their drivers as workers, not self-employed drivers.
In the judgement, Lord Leggatt outlined that ‘working time’ wasn’t limited to trips only (as Uber argued) but any time the driver is logged into the app and ready to accept trips. The judge also stated that fares are kept low to increase market share, which is common among disruptive tech companies. This was further support for accusations that Uber’s fares were unsustainable.
After an initial denial of responsibility, Uber relented and declared that major changes were afoot. In an email to Uber customers from the company, the ride-sharing giant said that Uber drivers would receive holiday pay, pension contributions and a guarantee of the National Living Wage. They added that this was in addition to the benefits available to drivers since 2018, including free insurance to cover sickness, injury, and maternity or paternity payments.
Uber’s driver status disputes didn’t do much for the brand’s PR either.
The future of Uber
Uber is well-known for not making a profit, this leads many commentators to ask “is their models sustainable at all?”. Prices are kept low for market share, and now are likely to be raised to give drivers the benefits outlined above. If the model is sustainable, it is only if customers are willing to pay more.
Uber promotes a big plan about ultimately turning a profit. It potentially involves abandoning drivers completely. Uber has bet big on driverless cars, launching a research and development effort to create its own driverless technology. But it turns out drivers were less dispensable than the tech giants thought. The technology is believed to be at least a decade away, and there is no reason that Tesla or another tech behemoth wouldn’t get there first. Uber eventually decided to threw in the towel and has sold its self-driving car research unit, leaving the company without a profit and in rather a strange place.
With drivers leaving and customer satisfaction at an all time low – what will become of Uber?